US stocks down as investors wait on Washington debt news

Oct. 16, 2013 @ 12:00 AM

NEW YORK -- The stock market was whipsawed Tuesday as the on-again, off-again talk of a debt deal in Washington made investors wonder just how pessimistic they should be.

Stocks were flat or down all day, but the size of the losses waxed and waned depending on which politician was giving a press conference. The market closed with its first loss in a week, with the Dow Jones industrials down 133 points. Yields on short-term government debt rose sharply as investors worried about the possibility of a default.

Indexes were down only slightly early Tuesday, when Republican and Democratic leaders in the Senate reported that a deal over increasing the nation's borrowing limit appeared to be getting closer. But after House Republicans came up with their own competing plan later in the day, and it was rejected by Democrats, stocks fell further.

After markets closed, Fitch Ratings said it might downgrade the government's AAA bond rating. The agency said it sees a higher risk for default because of the uncertainty over whether Congress will raise the debt limit. Fitch said it will make a final decision by the end of March at the latest, depending on how long any agreement to raise the debt ceiling lasts.

The losses were broad. All 10 industry groups in the S&P 500 fell and three stocks fell for every one that rose on the New York Stock Exchange.

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